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ECONOMY

Swedish economy over the worst: report

Sweden's economy is showing strong signs of recovery with tax cuts and low interest rates helping to bring the country out of a protracted slump, according to a new report from the National Institute of Economic Research (Konjunkturinstitutet - NIER).

Published: 18 December 2009 11:09 CET

Higher exports and rising consumption are expected to contribute to turning a 4.4 percent drop in GDP this year into a 2.7 percent increase in 2010, rising to growth of 3.3 percent in 2011.

“We’ve had two quarters in which GDP has increased and we are now predicting higher growth than we had previously anticipated; a fairly substantial upward revision,” NIER director-general Mats Dillén told the TT news agency.

According to an NIER statement, the economy has passed its low point largely because of expansionary fiscal and monetary policies, including tax cuts and low interest rates. Another positive factor is that world trade is recovering, entailing increased exports, the institute said.

The Swedish economy will have fully shaken off the effects of the financial crisis by 2014, the institute believes.

Unemployment is expected to remain high for the foreseeable future, rising from 8.5 percent in 2009 to 10.1 percent next year and 10.4 percent in 2011.

“Labour market developments are also better than expected and will not reach the levels we had feared, but we will still see growing unemployment for a while more,” said Dillén.

The institute declined to level any criticism at the Riksbank over its assessment that interest rates will remain at their current low levels until autumn next year, despite market predictions of an earlier rate hike.

“When it comes to the timing of interest rate increases, we and the Riksbank are more or less in agreement,” said Dillén.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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